RWE – Resources Well Employed

Maastricht University

School of Business & Economics

Maastricht, 08.05.2012

Heuer, V., Stöckmann, G., Qaiser, M.

ID number: I6020735, I6019773,

I6021223

Study: International Business

Course code: EBC 2026

Group number: 10

Tutor name: Pinto da Conceicao,

Pedro

Writing Assignment: Group Paper

Case 1

Table of contents

1. Introduction

2. The business model

3. RWE´s strategy

4. HR contributions to the business model and strategy

5. Human resource modes and configurations

6. The human resource contribution to success

7. Human resource challenges and relevant recommendations

8. Conclusion

1. Introduction

Nearly every human being in our world makes daily use of electricity. Electricity has become a

commodity. In Germany there are four main players existing in the electricity and gas industry.

One of these is the German based but internationally acting electricity and gas company RWE

group. It is managed by the Dax-30 holding RWE AG and has more than 70,000 employees and

operates in various countries throughout Europe. Supplying around eight million customers with

gas and 16 million customers with electricity, as the number one power supplier in Germany,

number three in the Netherlands and United Kingdom, the company generated more than €53

million revenue in the fiscal year 2010. RWE is a vertically integrated firm and covers the entire

value chain of energy. It is an expert in oil, gas and lignite production while additionally

investing in renewable energies. This vertical integration is one of RWE’s most important

strengths allowing for synergies and greater flexibility in dealing with market fluctuations. One

of the biggest threats RWE is facing are environmental regulations (Datamonitor, 2011) and the

demographic changes in its workforce. The demographic risk a firm faces can lead to significant

losses of firm-specific knowledge and expertise as well as a decrease of productivity (Strack,

Baier, Fahlander, 2008).

In the following, this paper investigates the business model of RWE and analyses in which way

it is able to contribute to the company’s success. Second the strategy will be discussed and

related to the organisation’s future outlook. Third the emphasis lies on the human resources of

RWE, modes and configurations, HR’s support of the business model and its contribution to

success. Finally upcoming challenges are evaluated and recommendations given. In discussing

the mentioned issues, this paper aims at answering the question how human resource

management is integrated and utilized in the RWE business group and to what extent it supports

the business model and contributes to its success.

2. Business model

According to Johnson, M. W., Christensen, C. M., & Kagermann, H. (2008), a successful

business model is dependent on four key factors, namely: A customer value proposition (CVP), a

profit formula, key resources, and key processes. However, having all of these factors in place

does not necessarily guarantee a model that provides your company with a sustained competitive

advantage. An effective business model consists of key resources and processes that are in line

with a company’s profit formula and fully support the value proposition. The business model of

the RWE group is based on a high integration of operations, vertically as well as horizontally.

Regarding the vertical integration, the formal structure of the group reveals that the very majority

of the value chain of both its gas and electricity service is addressed in-house. RWE is active in

all of the main processes within the traditional energy market: Gas and oil production (RWE

Dea), power generation (e.g. RWE Power), energy trading (RWE Supply & Trading), electricity

grids, gas grids and supply (e.g. RWE Deutschland). RWE is horizontally integrated in a way

that it offers both gas and electricity to the end consumer. Furthermore, RWE offers these two

products in bundles, i.e. one contract is sufficient and can cover both services for the customer

(RWE.com, 2012). To see how this degree of integration affects the performance of the

company, and why RWE’s operations have proved to be effective, the framework of a successful

business model will be applied (Johnson et al., 2008).

The customer value proposition of RWE can be described as satisfying the basic energy needs of

people in an efficient way. The company has concentrated on the European markets in the past

and present. Regulations, political conditions, living standards and emission policies are widely

homogeneous within the EU. The authors state that the CVP of a company should be focused

enough to satisfy customer needs in a superior way. Hence, the company’s geographical focus is

in line with the argumentation of the authors. Entering new markets on a bigger scale will bear

the risk to not properly address the needs and expectations of your new potential customer base.

The job to be done is very basic on first sight for RWE. The customer needs basic energy supply

in form of electricity and gas which is offered by the company. However, the fact that RWE

gives the customer the opportunity to combine both products within one contract is crucial.

According to the framework it is not only important what you offer the customer in terms of the

CVP but also how you offer it. One can assume that because of the comfort gained through the

combined service for the end customer, the value of both products can be greater in a package

than it would be if sold individually.

In respect to the profit formula, key resources and processes, this paper refers to the data

available from RWE’s financial data of the fiscal year 2010 (RWE.com, 2012). The group had

total revenues of €53,320 million distributed over 16 million and 8 million customers in

electricity and gas respectively (Datamonitor, 2011). However, the sum of these numbers does

not necessarily equal the amount of individual customers because of the bundling of both

services. Still the revenue model shows that RWE has a large customer base. The company’s

cost structure reveals that most expenses are variable costs. E.g. the company has high material

costs of €33,176 million. Staff costs are less than 10% of that and depreciation expenses are

relatively low with €3,213 million. This is particularly surprising since one would assume that a

highly vertically integrated company such as RWE has higher fixed costs and depreciation

expenses. However, we conclude from that, that RWE handles its value chain efficiently so that

the cost of vertical integration is outweighed by the associated cost savings. A low dependency

on fixed costs is also positive when demand is unstable since it offers the company great

flexibility which is particularly important in volatile markets such as the energy industry.

Contribution margins at RWE are rather low due to the high variable costs. However, the big

customer base has compensated for that in the past. In the case of RWE the challenge of resource

velocity is especially important. Since electricity cannot be stored efficiently, i.e. in large

amounts or over long periods of time, it is important to match local demand with supply.

However, RWE has a leading position in the development of a “SmartGrid” which focuses on

increasing efficiency in distributing electricity. From that we can conclude that the profit formula

supports the integrity in the business model of RWE. A large customer base, variable cost

structure as well as a good approach to resource velocity are in line with the CVP and offer great

adaptability for the company.

The key resources of RWE emphasize the integrity of the company. The value of non-current

assets of the firm consists of a majority of “plant, property and equipment” which ultimately

contribute to the scope economies of the firm. Nonetheless, intangible assets are significant as

well and contribute to ca. 28% of non-current assets. In comparison, the direct competitor E.ON

had intangible assets worth less than 10% of non-current assets (EON.com, 2012). The high

intangible value at RWE indicates that human resources and human resource practices play a key

role in the company’s success which will be analysed later on. Regarding key processes in the

company, RWE has offered several scholarships and trainee programs, which is in line with the

importance the firm puts on HR as mentioned in the key resources. Additionally, employees are

being transferred within the company to broaden their knowledge. This fully supports the

company’s profit formula and its focus on flexibility, especially regarding resource velocity. The

employees can use their newly developed all-rounder skills in another business unit of the

company if human resource re-allocation within the company is needed. The corporate values of

diversity and responsibility further strengthen the resilience within the group.

Ultimately, the fit and interdependencies between resources, processes and the formula as well as

their fit to the CVP as discussed above make the business model successful for the RWE group.

Energy markets are highly volatile due to socio-economic uncertainties. By analysing the four

key parts, it is revealed that RWE addresses these uncertainties with an internally coherent

model.

3. RWE’s strategy

On the company website of RWE one immediately finds the strategy they currently pursue. The

title of the group´s strategy, “More sustainable, more international, more robust” already gives a

hint to which goals RWE is trying to achieve in the future, but more detailed explanation of the

threefold concept is still needed. Hence, in the following we will explain the idea behind the

slogan, its implications and how it finally contributes to future growth of earnings. However,

due to the obscurity of the “robustness” concept and the lack of information, we will not

elaborate on the third concept.

First, we will address the sustainability dimension RWE is seemingly placing the most

importance on, judging from the make-up of the internet domain and the fact that it is mentioned

as the first of the three key elements. In defining the term “sustainability” RWE speaks of long-

term targets concerning the environment, community, its employees and their corporate

governance. For each topic they again have sub topics explaining the reasons for focusing on the

respective topic and the company´s goals in tackling problems of sustainability in that area. The

environment topic is concerned with climate and environment protection as well as energy

efficiency. In these areas the company mentions several figures about the environmental

pollution its energy plants are currently causing and give information on how to reduce this

pollution. Two ways of how RWE tries to achieve the reduction of the environmental pollution

are mentioned, the first being replacing old equipment with more efficient new equipment that is

capable of producing the same amount of electricity with less fossil fuel. The latter is mentioned

to be the main cause of CO2 emission, (99%), by the company. The more promising solution,

however, is the investment into the emerging renewables technologies. Therefore, RWE lists up

targets of investing “some €4 billion in renewables” within the next two years and increasing

“the proportion of renewables in [their] generating capacity to at least 20%” until 2020

(RWE.com, 2012). Given these goals, it is clear that RWE´s strategy is aligned with the overall

industry trend, which is more and more focusing on renewable energy as this will become the

future energy source due to the fact that global fossil fuel sources are diminishing and the

attention given to climate changes has grown into an issue everyone is fully aware of. However,

RWE is not only spending money on R&D concerned with renewable energy production

facilities to stay sustainable in the future. They also invest in new technologies like the so-called

“intelligent electricity” grid, as already indicated, or support and invent new service models like

the “smart meters” and “E-DeMa”, a virtual energy trading market for customers, both making

global electricity use more efficient and “[putting] cost management and environmental

protection in the hands of the customer” (RWE.com, 2012). For these efforts, RWE needs both

young, creative, motivated engineers and process designers as well as experienced, business-

savvy managers that understand to lead innovation projects and to integrate the various projects

into the operations of the company. To provide an attractive environment for their human capital

pool as well as managing the evolving demographic aging and hence complicated staffing

practices RWE puts high importance on human resource management in its strategy. This

emphasis on HR in the strategy is distinctively different from their main competitor, namely

E.ON (EON.com, 2012) and is for one part important for coping with the contemporarily

changing business environment concerning newer industry technologies and huge changes in

regulations that affect the current operations, but also for the second dimension of the strategic

plan: “More international” we will consider now.

RWE currently has its main operations in central Europe with the major part located in Germany.

Although, their reach is expanding to the south having most north-African countries in their

portfolio in the upstream value chain and to the west where they are active in the renewables

business, they are still heavily dependent on the German market. Accordingly, latter is also

mentioned as a weakness in their internal SWOT analysis (Datamonitor, 2011). This is especially

dangerous as Germany´s legislature is increasingly passing laws that are heavily affecting the

core operations of RWE´s business, making it eventually unsustainable. Hence, it is of strategic

importance for the company to seek new markets with high growth potential to gain market share

as well as markets where regulations and the competitive environment are more favourable

towards expanding in the renewables business. Now the company is orientating towards the

south-east of Europe as it might promise growth opportunities in the future. Overall, RWE is

trying to gain more market share in other European countries and to find a favourable spot in the

race for the promising renewables market. Here again it is to mention the importance of the

human resources for the international strategy of the RWE group. Venturing into a new market in

a foreign country demands employees with relevant knowledge about the country, the politics,

industry and markets as well as the ability to learn about the opportunities and threats in a faster

way than the competition. Additionally, engaging in necessary collaborative R&D projects with

related companies, universities or other research institutes to work on the necessary technologies

also calls for adaptive and interpersonally skilled employees, that can effectively exploit these

collaborative efforts for the company without the often related issues of joint cooperation

described vastly in the human resource literature.

To summarize the business strategy of RWE there are two obvious foci. The first one is the

investment in the renewables business consisting of both energy creation technology as well as

the energy management technology to ready itself for the future of the industry. The second one,

which is practically connected to the first one, is the expansion into foreign countries to gain on

the one hand market share and on the other hand a favourable environment for technological

development due to beneficial regulations and strategic collaborations. Both goals can be seen as

long-term goals that will not immediately create earnings returns. However, due to the well-

working integrated business model and the financial strength of the company it can definitely

sustain operations for the needed time period until these long-term investments pay off.

4. HR contributions to the business model and strategy

As discussed by Noe et al. (2010), an integration of HRM into the strategic decisions of a

company is becoming increasingly important for the success of one’s business. RWE has

managed to fit his HR and HR practices with the overall business model and strategy. Both, the

business model as well as the corporate strategy of the group aims at high flexibility of the

company. HRM supports an implementation of this strategy through several practices. Firstly,

the company offers job rotations where employees get to work temporarily in another business

unit or program. Employees, who participated in this, state that they were able to broaden their

skills and were satisfied to get to know new people (RWE.com, 2012). This may result in higher

motivation, increased productivity and further scope economies. Secondly, the company offers

its employees the possibility of alternative payment methods, e.g. it is possible to convert your

payment into additional vacation days. This depicts, that through HRM, the company strengthens

the concept of flexibility and expands it also to the level of employees. Thirdly, the “Next

Generation” trainee program at RWE emphasizes the value of adaptability and integrity.

Trainees get in contact with the value chain of the company and have to solve various business

problems, which fosters innovation. The HRM of the firm is also incorporated in achieving more

sustainability. E.g. the HR department recruits workers from within the company for pilot

projects such as “Clean Coal” (RWE.com, 2012) that aims to reduce CO2 emission.

Furthermore, the HR department plays a key role in realizing the goal of internationality. The

international growth and expansion of the company is constantly accompanied by the HR

department. This has the advantage that labour conditions can be more thoroughly analysed

through the HR who hires local experts when a new facility is being opened. Together with the

“Diversity Management” of the company which is perfectly in line with the corporate values of

the group, this helps to maximize the benefits from the desired internationalization process.

Moreover, the RWE group has consolidated its HR strategy of all businesses into 5 core values

(RWE.com, 2012). On the one hand, the consolidation of HR strategies makes cross-trainings

and the integrity of the firm easier. On the other hand, the 5 core values put a high emphasis on

superior performance and innovation and are therefore a driving factor to fulfil the customer

value proposition as mentioned above efficiently. RWE also grasps additional innovation

through internal development programs such as “Discoveries” (RWE.com, 2012) that enhance

bottom-up knowledge flows and identifies hidden managerial talent within the company. It

becomes clear that RWE aims to link its strategic department with HR which also resulted in the

“HR Cockpit”, an IT for senior managers to coordinate human resources and to simplify

leadership. The development and use of this tool shows the increasing value of SHRM within the

company. It is reasonable to say that methods like the “HR Cockpit” are helping executives to

see the relevance of HR and ultimately enable the company to benefit from the above mentioned

effects that HR has on the company’s strategy and business model.

Applying the framework of levels of SHRM (Noe et al., 2010) to RWE, the analysis shows that

there are at least one way linkages between Strategy and HRM within the firm. In terms of

Internationalization, one could even argue that to some extent, HR is involved in the Strategy

Formulation because of their key role in gaining international expertise. However, it is uncertain

how SHRM is dealt with in reality at RWE. It is possible, that two-way linkages and even

highest levels of integration exist, but this paper has not found the necessary proof for that.

5. Human resource modes and configurations

RWE, as a global company working in the field of electricity and gas, has different needs as well

as uses for human resources depending on the level within the firm. Until 2008 RWE

restructured several times and engaged in large-scale retirement measures. Nevertheless, the

surplus experienced now could in five to 15 years develop into a shortfall in some parts of the

business. As older employees retire the firm loses also the expertise and skills the employees

achieved in the firm over time. Moreover, an older workforce can also lead to a loss of

productivity. These two risks firm’s encounter can be described as capacity risks and

productivity risks as defined by Strack, Baier and Fahlander (2008). When assessing the different

employment modes RWE uses to recruit and the configurations used to train or enhance relations

capacity and productivity risks should also be taken into account.

Lepak and Snell (2002) distinguish between four different employment nodes that are related to

four human resource configurations. First there is the knowledge-based employment mode where

human capital is viewed as the core to the firm, because the firm relies on internal development

and commits to its employees, their skills and competencies. Second employees are hired

regarding their job-based skills needed to perform predetermined tasks that are rather low in

uniqueness but high in strategic value to the firm. Third a contractual employment relationship is

more likely to seek short-term arrangements with employees that perform basic tasks, which are

also a prime candidate of tasks to be outsourced. And finally companies can draw their human

resources from alliances and partnerships, thus engaging in a fourth mode of employment. This

mode is used when on the one hand unique skills are needed but on the other hand these are not

of such a high importance to the firm to employ internally. Each of the above described modes

brings a human resource configuration along, meaning that for each type or employee or

searched for skill a different employment relationship is configured.

When employing knowledge workers, the emphasis is put on a commitment based relationship.

The hired employees develop internally in order to utilize their proprietary knowledge. Crucial

attributes are flexibility, change and adaptation due to their enhancement of employees’

contribution. Here, talent is more important than achievement for developing firm-specific

competencies and employees may be rewarded on accumulating different skills. Regarding top

level employees at RWE that are needed to formulate strategies and set up policies within the

firm (Tricker, 2009), an emphasis on the knowledge and skills an employee has would be most

suitable. Tasks that combine high uniqueness and high strategic value are firm-specific and

needed capabilities are mostly developed within the firm. At RWE such employees are needed

for example for the renewable energies and further innovations. When these employees retire,

the accumulated knowledge and expertise is also gone, which increases the capacity risk.

In contrast job-based employees are rather contracted on a productivity based agreement, which

focuses more on a less unique but high in strategic value job-to-be done. Companies can afford

to focus on productivity when they are looking for standardized skills that are more transferable

than those of knowledge-workers. Employees that already possess the required skills are hired

and therefore this HR configuration can be characterized as a “buy” rather than a “make”

decision. On a lower level in the firm the risk of losing productivity becomes more serious. RWE

employs engineers and electricians that are of a high strategic value to the firm but their skills are

transferable and not unique, suggesting a productivity-based human resource configuration.

RWE uses a three shift rotation and as employees grow older they may not be in such a health

condition or have the endurance to be able to follow the normal procedure, increasing

productivity risk. The contractual employee that is hired for lower valued and less unique tasks

works based on compliance. In this case rules and regulations that apply are stressed and the

focus lies on the economic aspects of the contract. Whereas in using partnerships or alliances the

focus lies on a collaborative configuration partnership oriented towards the sharing of

information and on the development of trust between both parties. Capital is more likely invested

in the relationship itself and not in human resources specifically. Both of these configurations

apply to RWE only in a minority of cases. A collaborative relationship exists between the

different job groups or families within the firm. For a job group to be successful the information

exchange and the trust between its different parties must be high. Exchange makes best practices

widely available enhances efficient collaboration and aligns activities. To realize the

organisation’s goals in a collaborative human resource configuration, managers must be selected

on their ability and willingness to engage and invest in relationships.

In order to reduce capacity as well as productivity risk employees should be categorized into

different job functions, families and groups to keep an overview of the skills they develop and

how they are distributed throughout the firm. RWE created a job taxonomy that categorizes

different job groups, superior to job families, which in turn combine different job functions. For

example an electrician can work either in operations, planning or maintenance. Furthermore,

each of these three job families hosts more job functions, e.g. a maintenance worker can function

as a low- or high-voltage electrician. Due to this categorization an overview is easily achieved

and can contribute to an efficient recruitment, staffing and knowledge management process,

which will be discussed next (Noe et al., 2010).

6. The human resource contribution to success

Human resource functions such as recruiting, staffing and knowledge management can

contribute to a company’s success in many ways. Human resources are more and more gaining a

higher strategic value as they help a company to achieve its goals (Noe, R.A., Hollenbeck, J.R.,

Gerhart B., Wright, P.M., 2010). As RWE’s success relies on the skills, strengths and dedication

of its employees and the opportunities offered when utilising them (RWE.com, 2012), the human

resource department has a major strategic role in the business. The strategic issues HR can help

to address, include identifying new business opportunities such as assessing possible mergers or

acquisitions but also working on recruitment and developing talents internally. In general, human

resources can contribute to achieve business goals and fulfil the company’s mission (Noe et al.,

2010). RWE specifies its company culture in the code of conduct, which encourages employees

to take own responsibility and seeks to provide them with a supporting guidance. All the actions

RWE and its employees take are founded on four core values: Personal responsibility, honesty,

loyalty and respect for others and for the environment (RWE.com, 2012). These milestones have

implications for human resources, for example the emphasis on collaboration and employee

community implies a more collective orientation than an individualistic one. The ultimate

linkage between human resources and management would be an integrative linkage which is

based on a continuing interaction between strategy formulation and implementation processes,

allowing employees to have greater empowerment, commitment and feeling of contribution, thus

utilising all existent knowledge (Noe et al., 2010).

When recruiting it is important to know where the firm faces a shortage and recruit staff

accordingly to ensure that the organisation has qualified employees. Due to this firms should

engage in a human resource planning process. In this process the first step is to forecast demand

and supply and based on this analyse whether the firm faces a shortage or surplus of labour. For

shortages and surpluses there are different options that can be pursued to address the problem.

Recruiting new external hires is only one of the means to deal with a shortage. Otherwise firms

can also rely on temporary employees, outsourcing, retrained transfer, technological innovations

and current workers’ overtime. The recruitment process has many influencing factors such as the

applicants’ characteristics, firm policies, recruitment sources and the recruiter traits and

behaviours. (Noe et al., 2010). RWE puts a high emphasis on diversity management, aiming to

make constructive use of cultural differences and social variety, therefore also gaining different

backgrounds, viewpoints, beliefs as well as physical and intellectual skills. As RWE’s products

are offered in various markets and consumers differ, no area of diversity is untouched when

hiring employees with different appearance, gender, age, ethnic origin, handicap, sexual

orientation, religion and lifestyle. In this way consumers benefit as well as the company due to

the fact that a diverse workforce can enhance customer satisfaction and company reputation and

image, but also creativity, innovation, motivation and loyalty. In order to achieve such a

workforce RWE does not rely solely on recruiting from within, but also sets up trainee

programmes and scholarships to attract possible employees directly coming from universities

and to hinder competitors on recruiting the most valuable talents.

Once a workforce is recruited the HR department’s responsibility is to assign the employees to

the right tasks with making effective staffing decisions and manage their accumulated

knowledge. Staffing relates to how the skills and talents recruited can be utilised in an efficient

and supporting way. A balanced staffing portfolio is a key input for successfully managing new

operations. Therefore RWE even recruited a market specialist to help set up this portfolio (RWE

personnel report, 2011). Offering exciting and challenging work or empowering employees,

keeps up their motivation and commitment towards the company (Noe et al., 2010).

Opportunities for promotion or to work in other countries enhance motivation and commitment.

Intercultural teams that offer different viewpoints may render the day-to-day business more

interesting and challenging. RWE even won a price for their employees’ idea contribution. This

achievement may be attributed to the group’s efforts to foster team spirit and invest in its

employees with building up on their knowledge (RWE personnel report, 2011). Knowledge or

talent management is referring to the development and training employees take part in. It is a

“systematic planned strategic effort by a company to attract, retain, develop and motivate highly

skilled employees and managers” (Noe et al., 2010). To retain and motivate as well as enhance

their staff’s skills RWE initiated a mentoring programme, which includes a focus on career

opportunities or questioning stereotypes. Moreover, the programme also puts a special emphasis

on women at RWE.

Without the right skills and talent, the right staffing decisions and the right knowledge

management the workforce is not able to act as RWE’s core competency. This leads us to the

finding that human resource management is a key in coping with the day-to-day business in the

firm but also of utmost importance in addressing the upcoming challenges RWE is facing.

7. Human resource challenges and relevant recommendations

RWE is currently facing several challenges in the management of human resources (RWE.com,

2012). We will start with the demographic challenge that has been developing over the last

decades: The aging population of central European countries namely, Germany, Poland, Hungary

and the Czech Republic. Over the last decades the age distribution of the population of the

mentioned countries has been shifting upwards. The implications for the human resource

management of RWE are drastic. In the future there will be a shortage in supply as the

population will decline and not enough skilled junior personnel will follow to fill vacations.

Moreover, the average age of the workforce will increase and in the future there will be much

more employees entering retirement than experienced before. Skilled workers that have long

been trained and developed will increasingly leave the company, opening for example

managerial positions that demand a strong understanding of the company. Also, this will result in

a loss of relations with key stakeholders these employees might have had and which might have

contributed to an advantage of the firm. Though, in combination with the shortage of followers

and the on-going aging of the workforce this problem will become even more severe.

Furthermore, as workers become older, possible alterations to the incentive structures are

necessary. For example, older workers will bargain for more job security, pension plans and

other fringe benefits while becoming less productive and efficient over time. Overall, workers

will have more bargaining power ceteris paribus. This is one major challenge for the human

resource department to deal with effectively.

Another challenge faced by the company is that the retirement age will rise in the future in

European countries. This will result in an even older workforce amplifying the problems

mentioned before. In addition to the increasing bargaining power and the productivity loss of an

older workforce (Strack et al., 2008) there is another severe danger: The loss of innovation (Noe

et al., 2010). Today almost every company and especially companies in industries heavily

depending on technological progress need innovation to stay competitive. The issue with an

older workforce is that new insights from academic research that younger employees might bring

into the company as well as the motivation to find creative solutions or improvements for

processes will be lacking. A problem that arises, which seems a bit contradicting to the first one,

is that if there are new younger and ambitious employees entering the company, their career will

be slowed down, as the older workers are occupying the best-paid jobs longer than before, which

possibly results in loss of motivation and the adverse effect of their leaving the company. The

last major issue for the human resource department of RWE are the increasing “aspirations for

attractive employers”. The changes in family structures and the increasing number of women in

the workforce of today´s companies have increased the demands of prospective employees from

their future employers in terms of corporate culture, reputation of the company, compensation

policies and other benefits. As mentioned before the demographic changes are producing a

labour shortage of young and skilled employees companies need to stay competitive in the

industry. It is, therefore, of utmost importance for RWE to secure the valuable human resources

before the competition acquires them. Now, that these resources place greater importance on

factors such as reputation of the company concerning its corporate social responsibility as well as

its corporate culture the company´s human resource policies have to adapt to this trend in new

ways.

The question is now, which options to handle these challenges exist in the HR repertoire of

RWE. We start with the first, the declining and aging population of the central European

countries. First of all, RWE has to find ways to attract high potential human resources. The

younger generation as we pointed out already, though, has higher aspirations concerning

compensation and non-pecuniary benefits as well as the culture of the company to fit their

personality and that it offers an acceptable life-work balance. To address this issue, RWE should

first gain a good spot in the several rankings of institutions that grade workplaces, e.g.

www . greatplacetowork . com where RWE is not represented yet, but which is a prominent, and

well-regarded source for prospective employees. Additionally, advertising campaigns that solely

focus on human resource management would be adequate as well as an increase in the

advertising on career fairs and on campus at well-suited universities, known for their technical

study tracks as well as renowned business schools. The content of this advertising campaign

should focus on flexible work time models and traineeship opportunities that contain mentoring

with guaranteed employment. The flexible work time model is more and more relevant to today

´s lifestyle and the traineeship assisted by a personal mentor helps the company to develop the

future managers from the beginning onwards letting them gain insight into the whole company,

conveying to them the values and beliefs of the company and facilitating the establishment of

inter-firm relationships, necessary for a fast and deep understanding of the business functioning

of RWE.

Concerning the later retirement of employees the question on how to tackle this issue is twofold.

On the one hand, is has the positive effect that experienced workers are not leaving the company

as fast, taking with them valuable knowledge. On the other hand, though, they are blocking the

path for their successors. We think the best way to tackle this issue is a combination of earlier

retirement offerings and a training program that prepares the leaving managers and skilled

workers for a possible consulting or mentor role they could pursue. This way, the knowledge is

to some degree still retained in the company as it is passed on to the trainees or immediate

successors over a certain period of time. The HR department has to install a program that seeks

retiring employees with the relevant knowledge and necessary skills fitting a certain trainee or a

group of trainees and create incentives for both parties to make the knowledge transfer as

effective as possible. In this way, RWE can tackle the implications of an imminent labour

shortage and the aging of the population most effectively to be prepared for the future demands

of its business environment.

8. Conclusion

Contemporary human resource management literature is putting more and more focus on the

strategic value human resources practices can create for today’s organisations. To prove the

recent findings and to justify the course the literature is taking, we chose to exemplify theory

with the case of RWE, a company which is putting high emphasis on human resources in their

business model and strategy. We stressed the contribution of employees to the overall success of

the business model, as we found it to be a key resource, aligned with the customer value

proposition. This is mirrored in the strategic vision the company is pursuing under the slogan

“More sustainable, more international, more robust”. RWE employs knowledge workers, that

increase the company´s competitiveness as it capitalizes on the diversity of values, abilities and

perspectives among the subgroups of their employees. The organisation effectively exploits these

characteristics with an adaptive corporate culture that is continuously revised to meet current

challenges. Contributing to the supporting culture are knowledge- as well as job-based

employees that stay committed due to a focus on internal development of talents and capabilities

as well as the flexibility provided at RWE. To further build on its valuable human resources

RWE has to address the currently evolving demographic challenge of an older working

population, the new retirement legislation and the stronger demands of prospective employees

from the company´s reputation in the mentioned fields of corporate social responsibility as well

as compensation policies and working models that fit the new lifestyles and family patterns of

the new generations. Conclusively, it will surely keep its successful path in the future and may

even outperform its competitors, if these challenges are met and RWE continues to draw from as

well as develop its human resource base according to the new course of human resource

literature.

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